July PPI Flat; Core Rate Rises 0.1%

WASHINGTON — The July producer price data were favorable, offsetting two months of price gains in the spring. The bottom line is that inflation remains low.

July PPI was flat, and core rose 0.1% (0.0539% unrounded). These produced over-the-year rates of 2.1% growth overall and a 1.2% rise in the core — all lower than expected.

Food prices were flat as vegetable and beef prices fell. Prices for potatoes, which surged 32.4%, were an exception.

Energy posted a 0.2% drop, as most areas fell except for diesel fuel, which grew 5.6%. Gasoline posted a 0.8% slide and a 2.3% drop before adjustment.

In core, pharmaceutical preparations at a 1% rise, communications equipment at plus-0.4% and light trucks at a 0.1% increase (down 0.6% not seasonally adjusted), added. One important offset was a 1.1% drop for car prices.

Intermediate PPI was flat but crude PPI was up 1.2% as energy gained on rising coal and petroleum prices. This might suggest the cost of energy will rise ahead, though transportation and marketing costs could hold down pricing further down the production line. Energy is erratic: it fell in the first three months of 2013 and rebounded from April to July.

Bottom line: there were few signs of rising inflation in this favorable report.

The Bureau of Labor Statistics said effective with the January index released in February, PPI data will transition from a Stage of Processing to a Final Demand-Intermediate Demand system which will double coverage of the data reported. This will alter the items in the release for the first time since 1978 and will cause new historical data to be released. Experimental data will be released on the BLS web pages.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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